It can be argued that contemporary forms of globalisation differ significantly from their predecessors. Most notably, contemporary forms of globalisation are formed around ideologies of free trade, dismantling of trade barriers and exchange controls and (re)regulation to enable corporations to exploit scarce resources and make short-term financial gains. In such transformations, people are treated as mere means for securing private profits. The relentless march of privatisation and global free markets have facilitated massive frauds and failed to deliver the promised prosperity to developing nations. A rise in social inequality, unemployment, poverty, social displacement, violent crime and environmental degradation are considered to be externalities that the rest of society is left to mop-up. Alongside this, people are being encouraged to embrace liberal democracy with the expectation that elected governments can manage externalities and improve their life chances.

However, governments are finding it increasingly difficult to raise and collect tax revenues to fund public goods or redistribute wealth. Corporations and wealthy elites have developed elaborate schemes to avoid taxes and also encourage capital to take flight. For example, following the collapse of communism, Russia has been encouraged to embrace market capitalism and facilitate movement of capital. For every dollar of inward investment during the 1990s, it lost between US$ 10 and 20 to offshore accounts held by wealthy elites. Transfer pricing appears to be a key tool for facilitating flight of capital and tax avoidance. Tax authorities in China investigated 9465 multinationals and found that “Almost 90% of the foreign enterprises … use transfer pricing to dodge tax payments” (China People’s Daily, 25 November 2004). In Africa, there is considerable concern about flight of capital as well various “tax jurisdictions have latched onto the indiscriminate relocation of profits, which if taxed would assist greatly in advancing the economy of the African countries. Various methods are now being implemented to stop this outflow of funds and transfer pricing in various shapes and forms has been earmarked as a way to make a “quick buck”. The result is the unprecedented implementation of legislation with a smell of transfer pricing.”

Many of the technologies for tax avoidance and global under-development are facilitated by tax havens and offshore finance centres (OFCs) which have been likened to “fiscal termites” gnawing away at the foundations of global tax systems, frameworks of accountability and reshaping the global political economy. Such places and spaces have been central to the globalisation of financial services since at least the 1960s and are “the cornerstone of the process of globalization”. Total funds passing annually through tax havens are estimated to be around US$ 7 trillion. The value of the assets held in tax havens is estimated to US$ 11 trillion, which is over one-third of the world’s GDP. Almost half of the world trade passes through tax havens even though they account for only 3% of the world GDP, mainly because multinational corporations book many transactions through tax havens with the sole aim of avoiding taxes. Charities such as War on Want (2003) have directly linked tax avoidance to poverty and an assault on democracy. Networks of accountants, lawyers, bankers and their corporate clients are key players in the expansion of the tax avoidance industry both offshore and onshore even though they attract little attention in accounting and finance scholarly journals.

Faced with a squeeze on tax revenues and concerns about secrecy and confidentiality offered by tax havens, many governments have become concerned about the roles of tax havens and the tax avoidance industry. There is also an increasing amount of interest in tax havens and tax competition from non-governmental organisations (NGOs) such as War on Want, Oxfam, Association Pour La Taxation Des Transactions Financières Pour L’Aide Aux Citoyens (ATTAC), Tax Justice Network (TJN) and the Association for Accountancy & Business Affairs (AABA). To expand scholarly interest in the tax avoidance industry and its consequences for global development, a series of workshops have been organised by AABA and TJN at the University of Essex. These were attended by scholars from US, Europe and Australia, as well policymakers, NGOs and political activists. The papers in this volume were presented at these workshops and will hopefully stimulate further research into matters which affect every citizen.

The paper by Maria Boyrie, Simon Pak and John Zdanowicz examines the highly topical problem of capital flight that is facilitated by complex forms of transfer pricing. The authors focus on a case study of Russia–US trade and discuss some of the problems of attempting to estimate the magnitude of the capital flight through abnormal pricing techniques. Estimates of the size of Russian capital flight to the US alone vary from a conservative US$ 1.86 billion to an upper estimate of US$ 8.92 billion over the period 1995–1999. Boyrie, Pak and Zdanowicz discuss over-invoiced imports and under-invoiced exports based on official trade data. The vast flows of capital may not be related to obvious financial conditions in the US or Russia but may be connected with money-laundering and tax avoidance/evasion. Inevitably, money goes through an established financial infrastructure that is populated by western banks and financial institutions. The authors conclude their paper by calling for further research into the flows from Russia to its other trade partners.

Finance theorists have long argued that companies can reduce their cost of capital by avoiding taxes through 100% tax shields (i.e. forego making a contribution to society). In pursuit of shareholder value, such theories have been a boon to those seeking to avoid taxes and shifting burdens onto others. The paper by Jim Stewart discusses the relationship between tax policy and corporate structures, particularly treasury management operations. Using information from a commercial data base of over 5 million companies registered in the UK and Ireland, he provides examples of multinational firms profit-switching from comparatively high tax jurisdictions into tax havens. Stewart focuses on Ireland’s International Financial Services Centre (IFSC) in Dublin and he notes that for US firms, Ireland was the largest single location of pre-tax profits in 2002 (US$ 26.8 billion), narrowly beating rival tax haven Bermuda into second place ($25.2 billion). The paper also presents several tables collated from the data base that demonstrate the complex ownership patterns of the web of offshore companies and special purpose vehicles that multinational firms now regularly used as advised by the ‘Big Four’ accountancy firms.

International organisations and major governments may seek to curb tax havens, but their interventions may have unexpected or paradoxical outcomes, especially as many of the microstates or smaller nations are over reliant upon the financial services industry for their own revenues. Gregory Rawlings discusses the OFCs in relation to the raft of recent multilateral initiatives and increasing tax competition. His paper is based upon semi-structured fieldwork interviews in several offshore jurisdictions ranging from old-established OFCs to some of the newer, smaller centres. Rawlings explores his respondents (and their clients’) perceptions of the various international initiatives seeking to curb tax havens and what, if anything, has changed as a result. He argues that international efforts to increase the regulation of tax havens and OFCs may in fact increase tax competition in the short-run.